Wayne County communities keeping some zoo tax money for downtowns

During the past five years, the counties of Oakland, Wayne and Macomb have supported the Detroit Zoo with millions of tax dollars from a millage approved by voters in 2008. At the same time, many Wayne County communities have withheld more than $756,000 of the zoo's revenues to spend on their downtown projects -- and they're considering doing the same with the newly approved millage for the Detroit Institute of Arts.

Zoo officials said they get all of the tax money they expect of the 0.10-mill tax from Oakland and Macomb counties -- but not from Wayne County. Since 2008, communities such as Grosse Pointe, Dearborn, Taylor and Van Buren Township have diverted a fraction of zoo-tax revenues to spend in their downtowns, on everything from a dog park and sidewalks to decorative pavers and streetlights, according to community officials.

In a regional snit conducted mostly hush-hush and behind the scenes until now, the communities repeatedly have said -- in official meetings and correspondence -- that they're entitled to capture some of the zoo tax. As a group, about three dozen of them have diverted as much as $227,000 a year in zoo millage money, county tax records show.

The money was steered to downtown development authorities, small agencies created years ago by Lansing to help revive downtowns.

DDAs are allowed to take increases in tax revenues from within their boundries to help fund their operations, but it's unclear whether property taxes such as the one approved by voters for the zoo qualifies.

"This money promotes the growth of our downtown," said Rocky Alazazi, Taylor's economic development and public services director, who oversees the Taylor Downtown Development Authority.

Since the zoo tax was enacted, Taylor's DDA has put up ornamental fencing, improved crosswalks and installed better streetlights in the shopping district, Alazazi said.

The city captured an average of $39,434 of the zoo tax in each year since 2008, according to figures from the Wayne County Treasurer's Office. Taylor Mayor Jeffrey Lamarand acknowledged that voters in Taylor, as in the rest of the tri-county area, surely didn't know that DDAs would capture part of the tax collected for the zoo.

"But whose responsibility was it to educate the voters?" Lamarand said. Among the Wayne County communities that have captured the zoo tax, "everybody's legal finding is that, under state law, you should capture any and all assessments," he said.

Lamarand said the practice wouldn't stop with the zoo tax. What about the new arts tax, passed in November by voters in all three counties of metro Detroit and promoted as generating $23 million annually to support the DIA?

"Our local perspective is, there should be nothing that restricts us from taking the DIA funds as well," Lamarand said.

He and other Wayne County officials said they have opinions from several law firms supporting the captures. Romulus is leading a group of cities that are considering filing a joint lawsuit against the Wayne County Treasurer's Office.

"A lot of us are actually probably going to court," Romulus Mayor Alan Lambert said. "It's not that we're greedy. It's just that these communities really need this money."

"Look at all this revenue we've lost from taxable values going down," he said.

From all sources of property tax, including the zoo millage, Romulus now receives about $3 million less per year than it did before the meltdown in property values that began in 2007, Lambert said.

"Now they want to take even more from us?" he asked.

'People voted for this'

The Detroit Zoo just notched another big year of attendance -- its seventh in a row with more than 1 million visitors.

Fans say the grounds never looked so good, thanks in part to the tax.

"We're not bigger but we're better," following passage of the special millage that now supplies about 40% of the zoo's operating budget, director Ron Kagan said. Yet, the award-winning zoo could do more if more of the millage dollars flowed in, he said.

In Oakland and Macomb counties, each county treasurer said he sits on a watchdog board to ensure that the zoo gets all the tax money it is due.

"As far as we're concerned, the election created a tax that is supposed to go to the zoo," Macomb County Treasurer Ted Wahby said.

"It's right on your tax bill -- so much for the zoo," Wahby said.

Oakland County Treasurer Andy Meisner said he was aghast to learn that some leaders in Wayne County seem to think it's acceptable to ignore the will of the voters.

"Clearly, people voted for this with one intent -- to support the zoo," Meisner said. He sits on the Oakland County Zoological Authority, which oversees collecting the zoo tax in the county. The board has quietly objected to the DDA captures in Wayne County and suggested legal action by the zoo, according to meeting minutes.

Yet, communities that captured zoo taxes did so without much complaint from anyone in 2008, 2009 and 2010, said Tim Keyes, Romulus economic development director. In early 2012, "everyone got a cease-and-desist letter from the Wayne County treasurer," Keyes said.

"So we went to our city attorneys and said, 'Are we doing this right?' Our attorneys said, 'You don't have a choice but to collect it,' " he said.

The state's top lawyer's office has issued two advisory letters -- one under former Attorney General Mike Cox, a second under current Attorney General Bill Schuette -- pronouncing the captures of zoo taxes by DDAs illegal.

The Wayne County Treasurer's Office cited those letters in February in warnings sent to all 43 municipalities in Wayne County and did so again in September, saying the cities would face legal consequences if they continued the captures.

"We discovered this situation in 2009" and sought a legal opinion from the Attorney General, Deputy County Treasurer David Szymanski said.

"There's been a significant difference of (legal) opinion as to the appropriate treatment of these funds," said Szymanski, a former probate judge. The Treasurer's Office tried to mediate, but both sides held firm.

The latest round of collections for winter property taxes is under way across Michigan, with bills due Feb. 15. Szymanski said he is hoping that the practice of zoo tax captures has stopped.

But, he said, he sees little hope of recovering money that was captured in the past without enduring a lengthy lawsuit. And he won't know until late February just how many communities quit capturing the zoo's money in this round of taxes, Szymanski said.

Eyes on the arts millage

For those communities eyeing the new arts tax, Szymanski said his office has already warned that they may not capture revenues collected on behalf of the DIA.Yet, mayors and DDA officials of several Wayne County communities told the Free Press that they would continue to capture the zoo tax, would consider capturing the DIA tax as well and would defend their right to do so in court.

In Wyandotte in 2011, the most recently audited tax year, the city used $18,109.80 of the zoo's revenue for its DDA.

"I support the zoo," Mayor Joe Peterson said Friday. "I believe it's important to the kids and families. But what about our communities? These funds are going right into our downtowns ... and now they want to take $18,000 from us?"

Last month, the Wyandotte City Council voted to join other communities in a lawsuit defending the captures of zoo tax revenue, he said.

Dearborn officials agree with Wyandotte.

"With the DIA and the zoo millage and almost every other millage, we actually have the obligation under state law to capture this" for the city's two DDA districts, Dearborn Treasurer James O'Connor said.

"And in the big picture, it's only about 2% of what the zoo gets" in Wayne County, O'Connor said.

In 2011, the most recent year of reports available, Wayne County communities extracted $111,415 from the zoo millage, while the county sent about $4 million to the zoo, according to the Wayne County treasurer.

"In the big picture, it's not a lot of money," O'Connor said.

Still, his words don't satisfy officials of the zoo, including director Kagan.

After years of trying to resolve the dispute quietly, Kagan sounded last week like a man out of patience.

"We've been having difficult discussions in the past three or four years," he said. Of taxes being collected now, "we're expecting this money.

"If there are any remaining DDAs who want to continue to capture these funds, they're going to have to face legal action," Kagan said.

How DDA agencies capture taxes

• By state law, tax increment financing (TIF) lets a special district — such as a downtown — collect the taxes on annual increases in property values within a defined area, called increments. Numerous downtowns use TIF revenue to pay for improvements such as crosswalks, parking structures and decorative streetlights.

• Many TIF districts are run by downtown development authority (DDA) agencies.

• Some legal experts say state law not only allows, but actually requires the local capture of increments of property taxes, including the zoo tax. Based on that view, dozens of Wayne County communities have held back a fraction of the zoo millage money for their downtowns.